President Donald Trump sealed a deal that gives the US government a nearly 10% stake in Intel Corp, part of an unconventional bid to reinvigorate the beleaguered company and boost domestic chip manufacturing.
Under the agreement, the US will receive 433.3 million shares of common stock — representing 9.9% of the fully diluted common shares in Intel — according to a statement from the company. The US$8.9 billion investment will be funded by grants from the US Chips and Science Act and Secure Enclave program that had previously been extended but not yet paid, Intel said, confirming a report by Bloomberg News.
Together with the US$2.2 billion in Chips Act money that Intel already received, the investment totalled US$11.1 billion. The shares are nonvoting, and there is no board seat for the US government.
“We are grateful for the confidence the president and the administration have placed in Intel, and we look forward to working to advance US technology and manufacturing leadership,” Intel Chief Executive Officer Lip-Bu Tan said in the statement.
Intel shares rose 5.5% to US$24.80 at the close in New York on Friday. They slipped about 1% in choppy postmarket trading after the deal was finalized.
In a social media post, Trump described the transaction as a “great Deal for America and, also, a great Deal for INTEL.”
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“Building leading edge Semiconductors and Chips, which is what INTEL does, is fundamental to the future of our Nation,” he said.
The US taking partial ownership marks a stunning level of intervention in an American company, cutting against the principles of free-market capitalism that investors and policymakers have long considered sacrosanct except in the most extraordinary situations, such as war or a systemic economic crisis.
The administration considers it an extraordinary and unique situation — and sees semiconductor production as a matter of national security, a White House official said. Intel is one of a small number of American companies capable of making chips at scale on domestic soil, the official said, and the administration looks to avoid shortages like those in recent years that rattled US supply chains.
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Though the administration telegraphed its intentions with Intel in recent weeks, the move creates untold risks that could distort markets and the flow of capital as well as lead to massive taxpayer losses. But the government’s bet could also pay off in a major way for a onetime industry pioneer. Intel has faced a turbulent stretch with investors worried it is losing its technological edge and falling too far behind competitors.
The approach represents a new way for Trump to wield Chips Act funding, after long assailing the law signed by his predecessor, former President Joe Biden. Trump has said the law’s subsidies for semiconductor manufacturers didn’t provide any return for US taxpayers. Intel was already poised to be the biggest beneficiary of money from the Chips Act.
As part of the pact, the government will receive a five-year warrant — at US$20 per share for an additional 5% of common stock — that’s only exercisable if Intel ceases to own at least 51% of its chip-manufacturing business. PJT Partners served as Intel’s financial adviser on the transaction.
Santa Clara, California-based Intel touted its more than US$100 billion effort to expand manufacturing in the US and its new factory in Arizona, which is set to begin high-volume production this year. But it didn’t discuss a facility planned for Ohio that has been repeatedly delayed.
The deal represents a dramatic reversal from earlier this month, when Trump called for Tan’s ouster and accused him of being “highly conflicted” because of concerns over his earlier ties to China. Those remarks prompted the sit-down between the president and the Intel CEO, laying the groundwork for Friday’s deal.
“I said, ‘You know what? I think the United States should be given 10% of Intel,’ and he said, ‘I would consider that,’ and I said, ‘Well, I’d like you to do that,’” Trump said of his discussion with Tan.
Commerce Secretary Howard Lutnick has signalled that Trump wants to see more direct benefits to the US from funding key companies instead of just giving away grants. Lutnick worked to finalise the details of the agreement since Tan and Trump’s meeting.
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While the White House has cast the Intel deal as a possible template for other companies, they haven’t said which ones it may be having similar discussions with. A US official, however, said that companies that are boosting US investment pledges, including Taiwan Semiconductor Manufacturing Co and Micron Technology Inc, will not be pressured to offer equity in exchange for funding.
The fresh infusion of nearly US$9 billion instantly boosts growth prospects for the company. It also opens the door to partnerships that could be critical in developing new intellectual property and technology, areas where Intel has lagged in recent years.
Still, in order for government ownership to boost Intel, Trump will have to do more than just take a stake. Wall Street analysts don’t expect money alone to turn around the company, which has suffered from years of declining sales and market share. But there is a possibility that pressure from Trump will help line up more clients for Intel’s production arm, potentially justifying the cost of expanding domestic manufacturing.
“Trump kind of becomes your salesman,” said Dan Morgan, a senior portfolio manager at Synovus Trust who has covered the company since the 1990s.
Lining up more Intel clients might be a tough sell for Trump. The company’s chip-manufacturing arm is widely considered inferior to rivals and it still must build new cutting-edge facilities.
“Besides money, Intel needs customers,” Bernstein analyst Stacy Rasgon said in a note to clients. “Funding a buildout with no customers probably won’t end well for shareholders, of whom the US government would be the largest under this situation,” he said.
In its statement, Intel said it was “deeply engaged” with current and potential clients and partners that could help build up the US chip supply chain. Microsoft Corp, Dell Technologies Inc, HP Inc and Amazon.com Inc’s AWS all pledged support as part of the announcement.
“The industry needs a strong and resilient US semiconductor industry, and no company is more important to this mission than Intel,” Michael Dell, CEO of the namesake computer maker, said in the statement.
The Intel deal exemplifies how Trump has embraced a new brand of economic statecraft in his second term, as he looks to bolster domestic manufacturing, rebalance trade ties and ensure American dominance in critical sectors.
Trump in early August announced a legally questionable arrangement with Nvidia Corp and Advanced Micro Devices Inc, in which they agreed to give the US government 15% of revenue generated from sales of artificial intelligence chips to China.
That followed Trump securing a “golden share” from Nippon Steel Corp that gives the president power to make decisions over United States Steel Corp, which the Japanese steelmaker acquired. The Defense Department last month also announced that it will take a US$400 million equity stake in little-known US rare-earths firm MP Materials Corp.
